The Central Bank of Kenya (CBK) has lowered the Central Bank Rate (CBR) by 25 basis points to 9.25%, its lowest level since January 2023, marking an unprecedented eighth consecutive cut since February 2024, when the benchmark stood at 13%.
- •The cumulative 375-basis-point reduction represents the longest easing streak in CBR’s history.
- •The Monetary Policy Committee (MPC), chaired by Governor Dr. Kamau Thugge, said the decision reflects continued easing to stimulate lending and sustain economic recovery while keeping inflation expectations anchored.
- •Inflation stood at 4.6% in September, slightly up from 4.5% in August, but below the 5% midpoint of the 5 ± 2.5% target range.
Inflation and Growth Outlook
Core inflation eased to 2.9%, signaling subdued price pressures, while non-core inflation rose to 9.6% due to higher vegetable prices. CBK expects inflation to remain stable in the near term, supported by lower fuel prices and a firm exchange rate.
Kenya’s economy grew 5.0% in Q2 2025, up from 4.6% a year earlier, driven by agriculture, transport, finance, and trade. The CBK projects growth of 5.2% in 2025 and 5.5% in 2026, supported by a rebound in manufacturing and construction.
External and Banking Sector Stability
The current-account deficit widened to 2.1% of GDP in the year to August, from 1.6% a year earlier, due to higher capital-goods imports. Exports rose 3.6%, remittances 9.4%, and reserves stood at USD 10.76 billion (4.72 months of import cover).
The NPL ratio declined to 17.1%, from 17.6% in June, as defaults eased in trade, tourism, and real estate. Private-sector credit growth improved to 5.0%, while average lending rates fell to 15.1% from 17.2% in November 2024.
The Risk-Based Credit Pricing model, expected by March 2026, will enhance policy transmission and loan-pricing transparency.
The MPC said the policy stance would stimulate credit and economic activity while maintaining price and exchange-rate stability. The next meeting will be held in December 2025.
